How Does OTC Crypto Trading Work?

Not all crypto trades happen on public exchanges. Some of the biggest transactions take place behind closed doors, away from flashing price charts and crowded order books. It is the world of Over-the-Counter (OTC) crypto trading, where institutions, high-net-worth individuals, and funds move millions with discretion and efficiency.

OTC trading gained momentum around 2013-2014 when Bitcoin became too large for regular exchanges to handle big trades efficiently. Unlike traditional platforms, where every order impacts market prices, OTC deals occur privately. Buyers and sellers negotiate directly, ensuring discretion and preventing massive price swings.

Why does it matter?

Imagine a hedge fund that wants to buy $50 million worth of Bitcoin. If they place an order on an exchange, the price could spike before they finish buying. OTC trading prevents it and offers deep liquidity and customized deals. It’s an essential part of the crypto economy, yet few ever see it in action.

Well, let’s dive deep into OTC crypto trading.

What Is OTC Crypto Trading?

OTC trading bypasses traditional exchanges, where buyers and sellers negotiate deals privately through:

• OTC desks – platforms that match buyers and sellers. Some act as principals and assume trade risk, while others function as brokers, facilitating the deal.
• Independent brokers – individuals or firms connecting high-volume traders directly without using an exchange.

OTC trading stands apart in key ways:

Privacy: Trades are not publicly visible.

Liquidity: Large transactions clear smoothly without disrupting prices.

Custom terms: Prices and conditions are negotiable.

No order book: Trades happen privately, unlike on centralized exchanges (CEXs).

Personalization: Human negotiation, unlike automated processes on decentralized exchanges (DEXs).

What Makes Traders Use OTC?

OTC trading solutions like the one by CoinsPaid offer distinct advantages for large crypto transactions:

• Avoid slippage

Large orders on exchanges often push prices up before completion. OTC trading handles deals privately, preventing price spikes.

• Privacy and confidentiality

OTC transactions are private, protecting trading strategies.

• Flexible liquidity

It depends on the counterparty.

• Customizable terms

Prices, settlement times, and deal structures are negotiable.

How Does OTC Crypto Trading Work?

OTC crypto trading surpasses traditional exchanges and involves a private, negotiated transaction process. Here’s a list of the steps involved:

• Finding an OTC desk or broker

Traders need to connect with an OTC desk or an independent broker. OTC desks act as intermediaries, matching buyers and sellers, while some may take on the risk of the trade. Brokers simply facilitate the transaction.

• Negotiation

Once a buyer and seller are connected, they negotiate the terms of the deal, including the price, volume, and settlement time. Since OTC trades are private, there’s more flexibility in terms of structuring the trade compared to public exchanges.

• Execution

After terms are agreed upon, the trade is executed, and assets are transferred. The transfer process is secure and often involves escrow services or the use of smart contracts to ensure the trade is completed according to the agreed terms. Settlement can be immediate or take several days, depending on the terms of the deal.

• Compliance and verification

OTC desks are required to follow strict Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures to prove that all trades are legitimate and compliant with regulations.

The Future of OTC Crypto Trading

The future of OTC crypto trading looks bright, driven by several key trends:

• More and more institutional investors are embracing digital assets. Over 40% of institutions have already incorporated crypto into their operations. As OTC volumes increase by over 100% annually, hedge funds and asset managers are increasingly turning to OTC desks for large transactions, signaling a strong growth trajectory.
• Technology is transforming OTC trading. The use of smart contracts allows for secure, automated transactions without the need for intermediaries, which streamlines the process and enhances efficiency.
• Regulatory clarity is expanding. In 2025, 92% of firms plan to secure additional licenses in crypto-friendly regions like Singapore, Switzerland, and the UAE. It will increase regulation and improve trust and transparency in OTC markets.
• The rise of decentralized finance (DeFi) platforms will further enhance OTC trading by offering greater liquidity, transparency, and efficiency for large transactions.

OTC crypto trading allows for large-scale transactions to take place outside of public exchanges, offering privacy, flexibility, and minimal market impact. By working through intermediaries like OTC desks and brokers, traders can customize their deals and ensure smoother, more secure transactions. However, traders should always conduct thorough due diligence when selecting an OTC provider to ensure their trades are secure and reliable.